Effectiveness of EOQ and JIT in Warehouse Management System

This dissertation investigates the effectiveness of Economic Order Quantity (EOQ) and Just-in-Time (JIT) methods in warehouse management systems, focusing on a case study of Hay Dairy Pte Ltd in Singapore. The research employs a primary data collection method, utilizing an online survey among 50 employees to analyze the efficiency of both EOQ and JIT in managing inventory. The study aims to identify the optimal warehouse techniques for small businesses, considering market demands and financial stability. Findings indicate that while both EOQ and JIT have their merits, JIT is particularly beneficial for small-scale companies managing inventory in a dynamic market environment. The dissertation includes a literature review, research methodology, data analysis, and conclusions, providing a comprehensive understanding of warehouse management strategies and their impact on business operations.

Running head: DISSERTATION
Dissertation
Name of the Student
Name of the University
Author Note

1DISSERTATION
Abstract
This research project is based on the effectiveness of Economic Order Quantity and Just in
Time in Warehouse Management System. The study applies a primary research method in
which an organization called “Hay Diary Ltd” has been considered. Major purpose of
research is to identify the level of efficiency between Just in Time and Economic Order
Quantity in warehouse management system. When analysing the effectiveness of both the
methods in WMS, findings of existing papers indicate Economic Order Quantity method is an
effective option for large businesses. To perform the study, primary data collection method
has been applied, in which data has been collected by performing an online survey among 50
employees of Hay Diary Ltd in Singapore. As organizational members of the organization
have been engaged in the study, non-probability convenient sampling method was the best
choice for the study. Findings imply that both EOQ and JIT are effective on its own way in
relation to market demands and financial stability but when the small scale company would
rather choose Just in Time, when it comes to managing inventory. Small business does not
take the challenge from a dynamic market environment, where the number of similar business
is growing

2DISSERTATION
Table of Content
CHAPTER 1: INTRODUCTION..............................................................................................4
1.1 Background......................................................................................................................4
1.2 Research Problem.............................................................................................................5
1.3 Research questions and Objectives..................................................................................5
1.4 Research Scope................................................................................................................6
1.5 Research Significance......................................................................................................6
1.6 Summary..........................................................................................................................7
CHAPTER 2: LITERATURE REVIEW...................................................................................8
2.1 Introduction......................................................................................................................8
2.2 Warehouse management system......................................................................................8
2.3 Warehouse management and its elements........................................................................9
2. 3.1 Use of economic order quantity in inventory management system.......................11
2.4 Role of Just-in-time in inventory management..............................................................12
2.5 EOQ and JIT inventory management system.................................................................13
2.6 Inventory management...................................................................................................15
2.7 Inventory management through JIT technique..............................................................17
2.8 Gaps in the literature......................................................................................................18
2.9 Conceptual Framework..................................................................................................20
CHAPTER 3 –RESEARCH METHODOLOGY.....................................................................21
3.1 Introduction....................................................................................................................21
3.2 Research Investigation...................................................................................................21

3DISSERTATION
3.3 Research Paradigm/ Philosophy.....................................................................................22
3.4 Research Approaches.....................................................................................................23
3.5 Research Designs...........................................................................................................23
3.6 Data Collection method..................................................................................................24
3.7 Research Setting and Instrument....................................................................................25
3.8 Sampling........................................................................................................................25
3.9 Data Analysis.................................................................................................................26
3.10 Ethical consideration....................................................................................................26
CHAPTER 4: RESEARCH FINDINGS AND ANALYSIS...................................................27
4.1 Introduction....................................................................................................................27
4.2 Quantitative Data...........................................................................................................27
CHAPTER 5: CONCLUSION AND RECOMMENDATION................................................48
5.1 Conclusion......................................................................................................................48
5.2 Recommendation............................................................................................................49
References................................................................................................................................50

4DISSERTATION
Title- Measuring effectiveness of warehouse management system in a smaller scale
company between EOQ and JIT
CHAPTER 1: INTRODUCTION
1.1 Background
This research project is a detailed analysis of measuring effectiveness of warehouse
management system in smaller scale of business between Economic Order Quantity and Just-
in-time system. Thus, the study has considered Hay Dairy Pte Ltd to measure the
effectiveness of the techniques JIT and EOQ in warehouse management system. The major
purpose of the research is to identify effectiveness between EOQ and JIT in warehouse
management system in small business like Hay Dairy Pte Ltd. The study aims to investigate
the factors as well as warehouse techniques to apply and find out how a small business can
gain benefits from a warehouse system between EOQ and JIT. Richards (2017) performed a
study on warehouse management system and mentioned that warehouse management is an
act of organizing as well as controlling everything within the warehouse and ensure it
operates in the most suitable and optimal way. The process may include the arrangement of
the warehouse and its inventory, maintenance of the equipment, managing the new stock,
packing, shipping and many more tasks. When it comes to measuring the effectiveness of
warehouse management with the techniques, EOQ is worth considering.
According to Chen et al., (2013) economic order quantity (EOQ) plays a great role in
inventory management and this model has been a great topic for academic researchers in the
field. The Economic Order Quantity is basically number of units that a business should add to
inventory with each time to reduce the cost of inventory including the holding cost and
shortage cost. Another significant point in this model is that EOQ is a relevant tool for small
business owners who are required to make decisions regarding how much inventory should

5DISSERTATION
be kept on hand and how many items should be ordered in each time. On the other side,
Chen, Cheng and Huang (2013) emphasized on Just in Time and mentioned that it is a set of
strategic activities which are built to achieve maximum production with minimal or least
maintenance of inventory. Horta, Coelho and Relvas (2016) commented that the major goal
of this system is to reduce the waste by receiving goods only as they are required in the
manufacturing and process. However, there is hardly any study performed on the
effectiveness of warehouse management system in smaller business considering the
techniques of JIT and EOQ. So, present study aims to find out the efficiency of the
techniques between JIT and EOQ in warehouse management system of Hay Dairy Pte Ltd.
1.2 Research Problem
It has been identified that warehouse management system is generally associated with
six major tenants such as accuracy, cost control, efficiency, cleanliness, safety and security.
However, the underlying techniques are complicated as well as dynamic in nature. So, this
process presents major problems for warehouse managers across many nations. Hence, the
distributors are supposed to deal with the trade-off to resources constraints which further
leads to under performance in several key functional areas. Thus, to resolve this issue, the
businesses such as Hay Dairy Pte Ltd in the recent time has started to leverage technology
such as the use of barcode technology streamline, the use of Just in Time method and EOQ
process. However, measuring the efficiency of these process is another challenge. Thus, this
research is required to present a suitable comparison between Just in Time and Economic
Order Quantity system in warehouse management.
1.3 Research questions and Objectives
Research Questions

6DISSERTATION
1. What is the importance of warehouse management methods in a smaller scale
company?
2. How successfully EOQ and JIT method can create effectiveness for small business in
warehouse management system?
Research Objectives
 To evaluate the significance of warehouse management system in a small scale
company
 To critically examine the core techniques involved in warehouse management system
 To analyse the effectiveness of EOQ and JIT in warehouse management
1.4 Research Scope
The scope of the study is to explore the effectiveness of the techniques EOQ and JIT
in warehouse management system. This means study particularly focuses on EOQ and JIT
when exploring warehouse management system and techniques associated with it. In order to
measure the effectiveness of techniques, primary data analysis has been performed and the
data has been collected by online survey questionnaire which involves the employees of Hay
Dairy Pte Ltd. On the other side, secondary data analysis has been discarded as real-world
experiences of businesses are highly required in the study.
1.5 Research Significance
It is certain that warehouse management is always a significant concern as business
must take care of its stock, inventory, supplies and the end product. However, managing
inventory also counts the wastes, which is always there in the process. So, integrate the entire
process and lead the system effectively, businesses tend to use different techniques in which
some may help to reduce the cost, while some may help to avoid the manufacturing wastes.
Undoubtedly, each technique comes with its own benefits but in a greater scale, measuring

7DISSERTATION
the effectiveness of the used technique is a context of research of many academic scholars.
Even though, there are many techniques used in the warehouse management system but the
significance of this study in lies in the fact that the investigation in the research helps to learn
how JIT and EOQ are effective in warehouse management.
1.6 Summary
This chapter builds the backbone of the study as it provides a detailed background of
the study with respect to fundamental of warehouse management system, its importance in
small business and techniques used to manage the system. The chapter also provides research
objectives and questions derived from the background which are further reflected in literature
review in the following section.

8DISSERTATION
CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
It has been identified that a solid warehouse operation is at the foundation of every
successful retain brand. It is rather treated as an area which cold either destroy the business or
propel it into something that customers find reliable. This chapter of the dissertation provides
a detailed analysis of warehouse management system and techniques involved to manage the
system. The analysis has been conducted by considering and presenting the findings of the
existing studies that have been conducted on warehouse management system. Papers selected
for review were published after 2012.
2.2 Warehouse management system
When reviewing warehouse management system, it has been identified that many
scholars have emphasized on the importance of warehouse management system. For
example, Singh and Singh (2013) performed a study and mentioned the fact a warehouse
management system help to increase inventory management by decreasing inventory levels,
enhancing order fulfilment as well as minimizing order cycle. Likewise, Fichtinger et al.,
(2015) also mentioned that WMS is necessary because it is designed to management and
control all warehouse activities. Particularly WMS could allow the business track and keep a
record of every unit down to lowest range. Davarzani and Norrman (2015) commented that a
Warehouse Management System enables a business to deal with the inventory in time along
with the data as present as the current shipment and order.
Nonetheless, in the context of importance of warehouse management system, Accorsi,
Manzini and Maranesi (2014) emphasized on the need of the safety of stock, a Warehouse
Management System usually increases present space in the warehouse by locating the product
systematically. The author of this study has also added the fact that this enhanced efficiency

9DISSERTATION
can need maximize the productivity as well as cut the inventory holding expense on a large
scale. On the other side, Ziukov (2015) commented that the administration of real-time
warehouse management system could greatly reduce the paperwork that is traditionally
associated with warehouse and function. In addition it also ensure on time and the desired
flow of information and work. Unlike other others, Richards (2017) insisted on enhanced
cycle counting; this means business using warehouse management system can make use of a
warehouse management system to collect required data such as per regularity of movements
and specific locations. Therefore, it is easy to assign the staff for a cyclical count in an
organized way.
2.3 Warehouse management and its elements
As put forward by Ross and Kimball (2013), warehouse is one of the major stages of
supply chain where goods and the services are effectively accumulated. Generally, it is
related to real goods and it is often known as the facility in the supply chain to consolidate
products to minimize the cost of transportation, achieve economies of scale in manufacturing
or in purchasing. On the other side, Park and Kim (2013) commented that warehouse can also
be treated as one of the major the fundamental operations where the businesses can deliver
tailored services for the customers and can gain competitive advantages. There are different
types of warehouses such as they can be classified into production warehouse as well as
distribution centres and particularly in supply chain, they can be classified as the raw
materials warehouse, finished goods, distribution warehouse to customer demands. The
following image shows the type of warehouse management system that are usually designed.

10DISSERTATION
Figure 1: Warehouse management and its elements
(Source: Park and Kim, 2013)
However, when it comes to warehouse management system, García-Alcaraz et al.,
(2015) mentioned that management of a warehouse is the major function in the process.
However, Marodin and Saurin (2013) argued that instead of dealing with the complexity of
the core function, businesses deal with the systems relying on its types. The author of this
study has also mentioned the fact that WMS can deliver prominence into a Corporation’s
inventory at any location and time. WMS comes in an array of varieties, methods of
implementation and which depends on the nature and size of the business. For example, Hill
(2017) mentioned about the Stand-Alone System in a bigger enterprise for resource
arrangement. Some basic features of warehouse management system have been highlighted
by the authors in their WMS in business study.
Warehouse design: According to Richards (2017) warehouse design enables
organization to customized workflow as well finding logic to ensure that the warehouse is
made for maximised location for inventory. García-Alcaraz et al., (2015) critically mentioned
that the design remains as secondary concern because system should be more of efficiency
and flexible in nature.

11DISSERTATION
Inventory Tracking: This tracking of inventory fundamentally authorises the usage of
modern tracking system with the inclusion of radio-frequency identification (RFID) as well
as barcode scanners to accredit that it becomes easier to find out the goods when they are
required to move (Chen et al.,2013).
Receiving and Put-away: This function particularly allows inventory put-away as
well as retrieval and often helps to pick-to-light to guide warehouse workers locate goods and
services.
2. 3.1 Use of economic order quantity in inventory management system
Tat, Taleizadeh and Esmaeili (2015) mentioned that in order to avoid complexity of
inventory management, economic order quantity model is used by calculating number of
units a business should add to its inventory with each batch order to minimize the net expense
of its inventory. According to the authors, the cost of its inventory typically include the
holding cost; thus, the total cost could be represented by significant equation which is given
in the following.
Total inventory costs= ordering cost + holding cost
On the other side, Nia et al., (2014) mentioned that economic quantity model states
that there is a trade-off between inventory holding costs and inventory ordering cost but total
inventory cost is minimized when both ordering cost and holding cost are reduced. The
author has specified that holding cost may involve warehousing as well as logistic cost,
insurance costs and depreciation but this model tries to minimize the costs these costs by
making sure that the right amount of inventory is ordered with each batch; thus, there is no
excess of inventory sitting on hand as well as incurring these kinds of costs. Inman et al.,
(2013) performed a study on the importance of economic order quality and discussed about
ordering costs can refer to all of the costs related to actually ordering the inventory such as